Monday, August 27, 2007
Indian IT companies’ planned conquest of China has gone awry. But nobody is throwing in the towel just yet.
Anybody who goes to China aiming to make a quick buck from its vast population will be bitterly disappointed, says Joe Studwell in his 2002 book, China Dream: the Quest for the Last Great Untapped Market on Earth. Indian IT services companies, who forayed into the Middle Kingdom between 2002 and 2005 with $150 million in investments, must now feel Studwell was addressing them personally.
China was expected to be a delectable three-part conquest (see ‘China — The Next Smart Move’, BW, 29 August 2005). As a first step, Indian IT firms wanted to use China’s vast and cheap manpower pool to create development and delivery centres that would service their international clients. In the second phase, the capability of the development centres to work with double-byte code, a software technicality necessary to accommodate Sino-Japanese scripts, would be leveraged to net the lucrative Japanese market. The final goal was to target China’s domestic IT market, particularly its outsourcing business. But five years on, Indian IT companies in China are floundering. Their ability to do business in China is being challenged, and the assumptions they made of how foreign clients would embrace Chinese delivery centres are changing. Nevertheless, the game is far from over.
Not Quite One, Two, Three
The initial China hype has given way to a relentlessly red bottom line mainly due to clients not shipping work there as promised. “This is, in part, due to lack of security around intellectual property and patents in China,” says James Lin, CEO and managing director, Infosys Technologies (China). Today, all Indian IT services companies in China employ less than a thousand people, a dismal headcount. If wages in China were attractively cheaper 3-5 years ago, they are now much higher than in India. In a recent interview, TCS’ CEO S. Ramadorai said payscales for senior positions in China are sometimes 50-70 per cent higher than in India. Entry-level staffers command a 5-25 per cent premium. This stems from social benefit costs to be paid to the Chinese government. “Si jin (social benefits) occur under four heads — pension, unemployment, housing and medical,” says Prakash Menon, president of NIIT China. The additional burden can be up to 52 per cent in a city like Shanghai.Besides, India is already a global delivery centre, one that is less expensive than China.
China was expected to be a delectable three-part conquest (see ‘China — The Next Smart Move’, BW, 29 August 2005). As a first step, Indian IT firms wanted to use China’s vast and cheap manpower pool to create development and delivery centres that would service their international clients. In the second phase, the capability of the development centres to work with double-byte code, a software technicality necessary to accommodate Sino-Japanese scripts, would be leveraged to net the lucrative Japanese market. The final goal was to target China’s domestic IT market, particularly its outsourcing business. But five years on, Indian IT companies in China are floundering. Their ability to do business in China is being challenged, and the assumptions they made of how foreign clients would embrace Chinese delivery centres are changing. Nevertheless, the game is far from over.
Not Quite One, Two, Three
The initial China hype has given way to a relentlessly red bottom line mainly due to clients not shipping work there as promised. “This is, in part, due to lack of security around intellectual property and patents in China,” says James Lin, CEO and managing director, Infosys Technologies (China). Today, all Indian IT services companies in China employ less than a thousand people, a dismal headcount. If wages in China were attractively cheaper 3-5 years ago, they are now much higher than in India. In a recent interview, TCS’ CEO S. Ramadorai said payscales for senior positions in China are sometimes 50-70 per cent higher than in India. Entry-level staffers command a 5-25 per cent premium. This stems from social benefit costs to be paid to the Chinese government. “Si jin (social benefits) occur under four heads — pension, unemployment, housing and medical,” says Prakash Menon, president of NIIT China. The additional burden can be up to 52 per cent in a city like Shanghai.Besides, India is already a global delivery centre, one that is less expensive than China.
Labels: China Dream, IT market in China, Untapped Market on Earth
Investing in India?
Massive investment in India is predicted in the next decade as it takes its
rightful place on the global economic stage, according to Cross-border
Transactions: Spotlight on India, an Ernst & Young report.
In Singapore for the inaugural Ernst & Young Entrepreneur Of The Year World
Summit, Rajiv Memani, CEO & Country Managing Partner of Ernst & Young India,
said, “A new India is emerging – young, entrepreneurial, skilled and
competitive. The last few months have seen significant activity in foreign
investment. A very visible measure of this new confidence is that in the
next several months we expect US$15 billion worth of foreign investment, a
three-fold increase on the previous year.”
According to V V Ranganathan, Country Leader and National Director,
Entrepreneur Of The Year Awards, Ernst & Young India, “A robust
entrepreneurial culture has strengthened India’s position in the world
economy. As Indian businesses cross borders, they foster both wealth
creation and generation of employment opportunities. Given the right
impetus, there is very strong potential for more Indian businesses to become
truly world class players.”
Opportunities abound – across sectors.
Foreign investors, both strategic and financial, are increasingly entering
or expanding in the Indian market. And the big change, according to the
report, is that they are not just coming for outsourcing and IT
transactions. There is a far wider sectoral spread.
The value of M&A activity in India reached over US$9 billion in 2004 with
316 deals, more than double the value of 2003. “Foreign investors are seeing
huge opportunities in financial services in India after a reform in our
regulatory procedures. There is also a renewed investment focus on major
infrastructure projects whether they are in the telecoms, transport or
utility sectors. As much as US$200 billion worth of investment will be
needed to be injected into the domestic power sector alone,” says Memani.
With opportunities like these across India it is hardly surprising that
American and European Private Equity firms are flocking to the country.
Why is India such an attractive destination?
As well as the investment potential in the country, the report highlights
that India has a great deal going for it as an attractive location for
overseas investors. “We are a young country and a growing number of those
young people are well educated. India has had annual average economic growth
of 6% since the Millennium and disposable incomes are rising. When you
combine that with an economy which has low inflation and low interest rates
together with robust capital markets, a strong awareness of corporate
governance, and well-established legal and accounting systems, you do have
an appealing prospect for any company thinking of entering the Asian market
for the first time,” says Ranganathan.
rightful place on the global economic stage, according to Cross-border
Transactions: Spotlight on India, an Ernst & Young report.
In Singapore for the inaugural Ernst & Young Entrepreneur Of The Year World
Summit, Rajiv Memani, CEO & Country Managing Partner of Ernst & Young India,
said, “A new India is emerging – young, entrepreneurial, skilled and
competitive. The last few months have seen significant activity in foreign
investment. A very visible measure of this new confidence is that in the
next several months we expect US$15 billion worth of foreign investment, a
three-fold increase on the previous year.”
According to V V Ranganathan, Country Leader and National Director,
Entrepreneur Of The Year Awards, Ernst & Young India, “A robust
entrepreneurial culture has strengthened India’s position in the world
economy. As Indian businesses cross borders, they foster both wealth
creation and generation of employment opportunities. Given the right
impetus, there is very strong potential for more Indian businesses to become
truly world class players.”
Opportunities abound – across sectors.
Foreign investors, both strategic and financial, are increasingly entering
or expanding in the Indian market. And the big change, according to the
report, is that they are not just coming for outsourcing and IT
transactions. There is a far wider sectoral spread.
The value of M&A activity in India reached over US$9 billion in 2004 with
316 deals, more than double the value of 2003. “Foreign investors are seeing
huge opportunities in financial services in India after a reform in our
regulatory procedures. There is also a renewed investment focus on major
infrastructure projects whether they are in the telecoms, transport or
utility sectors. As much as US$200 billion worth of investment will be
needed to be injected into the domestic power sector alone,” says Memani.
With opportunities like these across India it is hardly surprising that
American and European Private Equity firms are flocking to the country.
Why is India such an attractive destination?
As well as the investment potential in the country, the report highlights
that India has a great deal going for it as an attractive location for
overseas investors. “We are a young country and a growing number of those
young people are well educated. India has had annual average economic growth
of 6% since the Millennium and disposable incomes are rising. When you
combine that with an economy which has low inflation and low interest rates
together with robust capital markets, a strong awareness of corporate
governance, and well-established legal and accounting systems, you do have
an appealing prospect for any company thinking of entering the Asian market
for the first time,” says Ranganathan.
Labels: Business, Economic, Investment
Thursday, August 23, 2007
Issues Running in HR Minds
Srinivasa Rao Dasari writes about the issues that are foremost on the minds of HR managers and the way many organisations are going to deal with these challenges
Human resources (HR) as a function is fast changing as it works closely with senior management, business segments, line management and functional leaders in an IT organisation. Human resource management is undoubtedly one of the major challenges ahead for Indian IT companies.
The IT industry is already under stress on account of persistent problems like attrition, confidentiality, loyalty, etc. Managing HR in the knowledge-based industry is not a cakewalk for HR managers as it a multi-task responsibility. In the present scenario, HR managers are performing a variety of responsibilities. Earlier their role was confined to administrative functions like looking after manpower requirements and maintaining rolls for the organisation. Now it is more strategic as per the demands of the industry. A S Murti, Senior Vice president (HR), Satyam Computer Services, explains, "Since the IT industry is growing at an encouraging rate, the supply-demand issue will pose a major challenge for the industry, particularly for experience-level professionals. Retaining the best talent will also be equally important. We can't retain professionals by paying higher salaries and offering attractive perks, etc. That is the not the best way. We need to create enthusiasm in their role, their work and the organisation." He adds, for this Satyam focusses on internal and external training programmes on periodical basis and job rotation. Every 18-24 months, professionals are placed on different processes of their choice.
Present issues
Some of the problems that the IT sector faces are managing people, motivation to adopt new technology changes, recruitment and training, performance management, development, and compensation management.
Managing people
Managing people in knowledge-based industry is critical, as human resource is the soul of the organisation. Since there is a high demand for the knowledge workers, often talented professionals enjoy high bargaining power due to the knowledge and skills in hand. The attitude is different for those who are taking up responsibilities at a lesser age and experience. These factors have resulted in the clear shift to individualised career management from organisation career commitment. Managing talent pool of people is essential for the growth of knowledge-based sectors like IT and BPO sectors.
Motivating the workforce
As the competition is growing rapidly in the global market, technological edge supported by talented manpower has become a crucial factor for survival in the market. Naturally, every organisation gives top priority to technology advancement programmes. HR managers are now performing the role of motivators for their knowledge workers to adopt new changes.
Competency development
The success of knowledge-based industry is dependent on the talent pool of its manpower. Hence, human capital is the real asset for any organisation, this makes HR's role important in recruiting, managing, and retaining the best. The HR department has a clear role in this process and determines the success rate of any organisation. If HR managers are not competent enough, this will have a direct impact on the organisation. There is now a need to develop competent HR professionals who are sound in HR management practices with strong business knowledge.
Recruitment and training
Recruitment has become a major function from an important sub-system in HR, particularly in the IT industry. HR managers play a vital role in creating assets for the organisation in the form of quality manpower. Another challenge for HR managers is to put systems in place to make the people a perfect fit for the job. Skill redundancy is fast in the software industry. To overcome this problem, organisations give utmost priority to training and skill enhancement programmes on a continuous basis. Many IT companies are providing technical training to the employees on various platforms every quarter. Most find this regular training quite useful, apart from the feeling of security it provides.
The trust factor
Low levels of trust inhibit tacit knowledge sharing in the knowledge-based industry. Concerned about the recent reports about an employee of Indian call centre who allegedly sold bank account details, Nasscom is gearing up to face the unforeseen future challenges in the form of confidentiality in the IT industry. Towards this, Nasscom is working closely with legal authorities in the UK to ensure those responsible for criminal breach. Any case of theft or breach of confidentiality should be treated seriously. Such malpractices would pose a serious problem to SMEs in the BPO sector. Most of the small and medium companies in this segment do not have enough capabilities.
Lt Bipin Chandra, Vice president (India operations), Knoah Solutions, does not believe that this will severely affect the BPO industry in India. He says, "We have enough security measures as far as data security is concerned. Accessing the database should be need-based only and without necessity if anyone tries to access, our system will alert us. We have been strengthening our security policies and our existing system does not allow employees to browse through the data. Going by the recent reports, I don't think there would be any significant impact on BPO companies. Our clients ask for higher levels of security on information systems. Every organisation need to have a fool-proof security system apart from building loyalty and commitment among employees as part of HR strategies, which are common for any type of organisation."
Critical factors
At Wipro it is believed that knowledge-based industry faces five most critical challenges. One of the most important is talent management and development. The professionals bring with them a lot of aspirations and to be on competitive edge they look out for three important dimensions-learning, technology and early opportunities. A recent study conducted by Wipro showed that people join the company because of the above and they act as a differentiating model for the organisation. In the IT industry the best practices today may not be the same after a period so it is imperative that it constantly improves its own business aligned HR processes to be at a leading edge. Another dimension to the challenges faced by IT Industry is the growing pace of talent acquisition and that creates with it the challenge of smoother assimilation and cultural binding of the new joinees into the organisation fold. The pressure of delivering the best of quality services in reduced time frame calls for ensuring that employees maintain a work-life balance. Another important problem, which will continue, is retention of the employees.
Addressing the issues
Manjula Rajoli, Manager (Talent Engagement and Development), Wipro Technologies, elaborates on how Wipro manages the challenges, "Wipro's talent management and engagement has a two fold approach. We contain the challenges by following best practices in two areas-compensation and non-compensation. Challenges arising due to compensation reasons are contained at Wipro by continuously benchmarking our salaries with our competitors and providing merit-based salary increases. In addition, for middle and senior management we have equity-based compensation through Restricted Stock Units (RSUs). We also have various employee benefits programmes.
Human resources (HR) as a function is fast changing as it works closely with senior management, business segments, line management and functional leaders in an IT organisation. Human resource management is undoubtedly one of the major challenges ahead for Indian IT companies.
The IT industry is already under stress on account of persistent problems like attrition, confidentiality, loyalty, etc. Managing HR in the knowledge-based industry is not a cakewalk for HR managers as it a multi-task responsibility. In the present scenario, HR managers are performing a variety of responsibilities. Earlier their role was confined to administrative functions like looking after manpower requirements and maintaining rolls for the organisation. Now it is more strategic as per the demands of the industry. A S Murti, Senior Vice president (HR), Satyam Computer Services, explains, "Since the IT industry is growing at an encouraging rate, the supply-demand issue will pose a major challenge for the industry, particularly for experience-level professionals. Retaining the best talent will also be equally important. We can't retain professionals by paying higher salaries and offering attractive perks, etc. That is the not the best way. We need to create enthusiasm in their role, their work and the organisation." He adds, for this Satyam focusses on internal and external training programmes on periodical basis and job rotation. Every 18-24 months, professionals are placed on different processes of their choice.
Present issues
Some of the problems that the IT sector faces are managing people, motivation to adopt new technology changes, recruitment and training, performance management, development, and compensation management.
Managing people
Managing people in knowledge-based industry is critical, as human resource is the soul of the organisation. Since there is a high demand for the knowledge workers, often talented professionals enjoy high bargaining power due to the knowledge and skills in hand. The attitude is different for those who are taking up responsibilities at a lesser age and experience. These factors have resulted in the clear shift to individualised career management from organisation career commitment. Managing talent pool of people is essential for the growth of knowledge-based sectors like IT and BPO sectors.
Motivating the workforce
As the competition is growing rapidly in the global market, technological edge supported by talented manpower has become a crucial factor for survival in the market. Naturally, every organisation gives top priority to technology advancement programmes. HR managers are now performing the role of motivators for their knowledge workers to adopt new changes.
Competency development
The success of knowledge-based industry is dependent on the talent pool of its manpower. Hence, human capital is the real asset for any organisation, this makes HR's role important in recruiting, managing, and retaining the best. The HR department has a clear role in this process and determines the success rate of any organisation. If HR managers are not competent enough, this will have a direct impact on the organisation. There is now a need to develop competent HR professionals who are sound in HR management practices with strong business knowledge.
Recruitment and training
Recruitment has become a major function from an important sub-system in HR, particularly in the IT industry. HR managers play a vital role in creating assets for the organisation in the form of quality manpower. Another challenge for HR managers is to put systems in place to make the people a perfect fit for the job. Skill redundancy is fast in the software industry. To overcome this problem, organisations give utmost priority to training and skill enhancement programmes on a continuous basis. Many IT companies are providing technical training to the employees on various platforms every quarter. Most find this regular training quite useful, apart from the feeling of security it provides.
The trust factor
Low levels of trust inhibit tacit knowledge sharing in the knowledge-based industry. Concerned about the recent reports about an employee of Indian call centre who allegedly sold bank account details, Nasscom is gearing up to face the unforeseen future challenges in the form of confidentiality in the IT industry. Towards this, Nasscom is working closely with legal authorities in the UK to ensure those responsible for criminal breach. Any case of theft or breach of confidentiality should be treated seriously. Such malpractices would pose a serious problem to SMEs in the BPO sector. Most of the small and medium companies in this segment do not have enough capabilities.
Lt Bipin Chandra, Vice president (India operations), Knoah Solutions, does not believe that this will severely affect the BPO industry in India. He says, "We have enough security measures as far as data security is concerned. Accessing the database should be need-based only and without necessity if anyone tries to access, our system will alert us. We have been strengthening our security policies and our existing system does not allow employees to browse through the data. Going by the recent reports, I don't think there would be any significant impact on BPO companies. Our clients ask for higher levels of security on information systems. Every organisation need to have a fool-proof security system apart from building loyalty and commitment among employees as part of HR strategies, which are common for any type of organisation."
Critical factors
At Wipro it is believed that knowledge-based industry faces five most critical challenges. One of the most important is talent management and development. The professionals bring with them a lot of aspirations and to be on competitive edge they look out for three important dimensions-learning, technology and early opportunities. A recent study conducted by Wipro showed that people join the company because of the above and they act as a differentiating model for the organisation. In the IT industry the best practices today may not be the same after a period so it is imperative that it constantly improves its own business aligned HR processes to be at a leading edge. Another dimension to the challenges faced by IT Industry is the growing pace of talent acquisition and that creates with it the challenge of smoother assimilation and cultural binding of the new joinees into the organisation fold. The pressure of delivering the best of quality services in reduced time frame calls for ensuring that employees maintain a work-life balance. Another important problem, which will continue, is retention of the employees.
Addressing the issues
Manjula Rajoli, Manager (Talent Engagement and Development), Wipro Technologies, elaborates on how Wipro manages the challenges, "Wipro's talent management and engagement has a two fold approach. We contain the challenges by following best practices in two areas-compensation and non-compensation. Challenges arising due to compensation reasons are contained at Wipro by continuously benchmarking our salaries with our competitors and providing merit-based salary increases. In addition, for middle and senior management we have equity-based compensation through Restricted Stock Units (RSUs). We also have various employee benefits programmes.
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